Company Overview
AppLovin Corp operates as a leading mobile technology platform, primarily focused on mobile gaming advertising and monetisation solutions. The company’s core business revolves around its AXON advertising platform, which serves both mobile gaming developers and increasingly, e-commerce advertisers, through advanced machine learning algorithms and targeted advertising capabilities.
Strong Financial Performance Drives Upgrade
Phillip Securities Research has upgraded AppLovin Corp to BUY from ACCUMULATE, setting a target price of US$600. This upgrade comes despite lowering the previous target price, reflecting both the company’s strong operational performance and a more cautious market environment. The research house increased its weighted average cost of capital to 6.5% from 6.0% to account for current market volatility.
The fourth quarter of 2025 demonstrated AppLovin’s resilience, with revenue climbing 66% year-on-year to US$1.66 billion, though this fell slightly below expectations. More impressively, profit after tax and minority interests surged 84% year-on-year to US$1.1 billion, surpassing forecasts and highlighting the company’s improving operational efficiency.
Robust Gaming Advertising Foundation
The company’s advertising business continues to demonstrate exceptional strength, driven by technological improvements in its core mobile gaming segment and the expansion into e-commerce verticals. AXON’s, their self-service AI-powered advertising platform, unique approach of delivering full-screen video advertisements during natural game breaks sets it apart from competitors. This format ensures complete viewability and captures users’ full attention, resulting in an average watch time exceeding 35 seconds—significantly longer than the 30 seconds typical for television and 7 seconds for social media platforms.
The platform’s superior monetisation efficiency enables advertisers to achieve break-even on acquisition costs within 30 days, considerably faster than the approximately three months required on other major advertising platforms. This efficiency has driven annual advertiser spending on the platform to exceed US$11 billion.
Strong Profitability Growth
AppLovin’s profitability metrics showed remarkable improvement in the fourth quarter, with net income rising 84% year-on-year to US$1.1 billion. The company achieved a 16% margin improvement, with margins expanding from 61% to 77%, supported by enhanced operating leverage and a 55% year-on-year reduction in expenses. Free cash flow increased 88% year-on-year to US$1.31 billion, whilst the company maintains a healthy cash balance of US$3.95 billion, representing 91% year-on-year growth. The company retains approximately US$3.28 billion in remaining share repurchase authorisation.
Frequently Asked Questions
Q: What is Phillip Securities Research’s current recommendation and target price for AppLovin Corp?
A: Phillip Securities Research has upgraded AppLovin Corp to BUY from ACCUMULATE with a target price of US$600.
Q: How did AppLovin’s fourth quarter 2025 financial performance compare to expectations?
A: Revenue of US$1.66 billion was below expectations but grew 66% year-on-year, whilst profit after tax and minority interests of US$1.1 billion surpassed forecasts, rising 84% year-on-year.
Q: What makes AppLovin’s advertising platform unique compared to competitors?
A: AXON delivers full-screen video advertisements during natural game breaks, ensuring complete viewability with average watch times exceeding 35 seconds, compared to 30 seconds for TV and 7 seconds for social media platforms.
Q: How quickly can advertisers achieve break-even on AppLovin’s platform?
A: The platform’s monetisation efficiency enables advertisers to break even on acquisition costs within 30 days, significantly faster than the roughly three months required on other major advertising platforms.
Q: What drove the strong profitability growth in the fourth quarter?
A: Net income growth of 84% year-on-year was driven by robust revenue growth, improved operating leverage, a 55% reduction in expenses, and margin expansion from 61% to 77%.
Q: What is the company’s current financial position?
A: AppLovin maintains a healthy cash balance of US$3.95 billion, up 91% year-on-year, with free cash flow of US$1.31 billion and remaining share repurchase authorisation of approximately US$3.28 billion.
Q: Why did Phillip Securities Research lower its revenue forecast despite the upgrade?
A: The research house lowered revenue forecasts by 15% as e-commerce revenue is expected to take time to materialise, given the segment remains in early stages and is focusing on scaling.
Q: What factors are expected to support future growth?
A: Growth is expected to be supported by expansion into the e-commerce vertical, AXON, and continued strong performance in the gaming segment.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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